A Lesson in Receivership

Life is different from school in one significant way – in real life you get the test first and the lesson follows. I often say that we learn best from our mistakes, so I’ve definitely learned something this week.

One of my clients recently went into receivership. This is different from bankruptcy, as the Receiver informed me today, because as an unsecured creditor I’m not entitled to any compensation for my completed work. The only secured creditor is the Business Development Bank of Canada (BDC), “a financial institution wholly owned by the government of Canada” (kind of makes me a minor shareholder). The bank gets 100% of what’s left, which equates to about one third of its investment, so the bank suffers a significant loss but the rest of us get nothing.

What have I learned from this?

  • It’s better to be a secured creditor than an unsecured one.
  • Receivership is different than bankruptcy.
  • As one of 30 other unsecured creditors, I see what kind of an impact receivership/bankruptcy has on the local business community.
  • Always, always negotiate some up-front payment, even if you have done work with the client before, so that you’re not out 100% in case of a disaster.
  • The project isn’t over until the cheque clears the bank.

For additional learning, here are some definitions from the Canadian Bankruptcy Dictionary [link removed by request of BankruptcyCanada.com – see below for text of request]:

Debenture:
Security instrument evidencing a debt due from one party to another, payable on demand or otherwise, which can be a fixed and/or floating charge on assets and which can grant the lender broad powers to recover the amount due upon default, including the appointment of a receiver or receiver-manager.

Receiver:
A person or corporation appointed by a person who holds a debenture or other security agreement, giving that person authority to take possession of and sell the asset(s) specified in the debenture. A Receiver cannot manage or operate a company for more than 14 days.

Receiving Order (Bankruptcy Order):
An Order handed down by the Court following the successful petition to have a person or company placed into bankruptcy. In an amendment dated December 15, 2004 this term was changed to Bankruptcy Order.

email received 2 Jan 2014:

Hi. My name is Gordon Sands. I am a principal of BankruptcyCanada.com.

We are contacting you to respectively request that you remove or mark as “NoFollow” the link(s) you have to BankruptcyCanada.com from http://jarche.com/  because the links are not in the same niche as our site.

Kindly advise us when you have either removed or marked the links “NoFollow” so we do not send you a follow-up email.

Regretfully we will be forced to submit, websites not complying with our request, to Google using their Link Disavow procedure. This may have an adverse effect on your site.

Yours truly,

Gordon Sands

Gordon@BankruptcyCanada.com

Update: More information on how the golden era of spam comments has ended, and what likely prompted the email “request” above.

6 Responses to “A Lesson in Receivership”

  1. Robert Paterson

    As a fellow creditor of the same debacle – it feels odd to me that real Canadian citizens who have really “invested” in this company are excluded whereas the institution that only represents Canadians in the abstract and who employs people that are immunized from the default themselves get something.

    Am I misssing something here?

    Reply
  2. Harold

    That was my opinion as well, Rob.

    Here is the mission of BDC:

    “Making a difference: Living our values is our guide. Helping Canadian entrepreneurs grow and prosper is our mission. Their success is our success.”

    I feel that it’s a bit ironic that BDC, in acting to secure its investment, has adversely affected at least a dozen other small companies who cannot afford these losses. BDC is not helping these companies to “grow and prosper”. I guess it’s all a matter of perspective.

    Reply
  3. Robert Paterson

    How ironic – now I see the mission, I am starting to get mad. Their mission is to look after themselves

    If we stripped out ACOA and the founder, there would be enough to cover all the real entrepreneurs

    Am I whistling or do you think it worth raising this – especially as I warned BDC a year ago about the risk

    Reply
  4. Harold

    Rob:

    Personally, I’m trying to focus on generating new revenue, because I think that this would be a very long fight with a small possibility of seeing a small percentage of what I’m owed.

    I’m also not sure of what kind of action we would get from an organisation that featured prominently in the Auditor General’s 2003 report that sparked the “Sponsorship Scandal”.
    http://www.oag-bvg.gc.ca/domino/reports.nsf/html/20031103se01.html

    Reply
  5. Lisa Marr

    I would like to contact the writer who had an unfortunate experience of losing money through a bankruptcy. It was mentioned that the BDC was the only secured creditor. What company went bankrupt?

    Cheers,

    Lisa

    Reply

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